Nixon withholds nearly $401 million from state budget

Gov. Jay Nixon speaks at a press conference Friday in his Missouri Capitol office in Jefferson City. Citing projected costs of House Bill 253, Nixon announced he was withholding $400 million from the Fiscal Year 2014 budget.

State employees likely won’t see their $500 pay raise next January, and another 1,000 jobs could be cut from the state’s payroll if lawmakers override his veto of a tax-cut bill, Gov. Jay Nixon told reporters at the Capitol on Friday.

And those big capital improvements projects that lawmakers OK’d in May also are on hold — including $13 million for planning and designing a new Fulton State Hospital, $38 million for a new state office building on the Missouri State Penitentiary site and most of the $50 million targeted for major repairs to the Capitol.

“As governor, I have the responsibility — and the authority — to be sure that our state remains on a fiscally sustainable path,” Nixon explained. “That is why, each year, we review the budget carefully, line by line ... and we assess the impact, and any unintended consequences, of legislation passed by the General Assembly.”

Nixon met with reporters after signing the budget bills — about 62 hours before the state’s new budget year begins at 12:01 a.m. Monday.

The governor said he vetoed only four items, worth $1.14 million total — but he announced $400.7 million in withholds, which means the money can’t be spent even though lawmakers authorized the spending, until Nixon chooses to release it.

In most cases, the withholdings affect new programs or spending increases above the current business year budget that ends at midnight Sunday.

He withheld the $66.4 million in increased funding aimed at Missouri’s elementary and secondary public schools, giving them the same amount of state aid they received this year.

And he withheld 4 percent from the core budgets of the state’s two- and four-year colleges and universities, but authorized the increased spending for performance-based improvements.

“Let me be clear — restricting education funding is NOT how I think we should move the state forward,” the governor said.

The withholdings affect all but $3.5 million of the $50 million lawmakers approved for maintenance and repairs in the Capitol building and complex, and all but $5 million of the $70 million earmarked for maintenance and repair at state-owned facilities throughout the state.

“We have applied these (spending) restrictions broadly, while making every effort to ensure they do not, unnecessarily, impact our most vulnerable Missourians or the vital services on which they depend,” the governor said.

Nixon and Budget Director Linda Luebbering both said the withholds were ordered largely out of concerns about the financial “hits” they said the state budget will take if lawmakers succeed in overriding Nixon’s veto of the tax cut bill.

“With a price tag of at least $800 million annually, House Bill 253 would undermine our fiscal foundation now and for years to come,” the governor explained. “(It) is a dangerous experiment we simply cannot afford.

“These costs are real, and immediate, if my veto is not sustained.”

The Legislature’s Republican leaders strongly disagreed.

“At a time when our state is just beginning to show signs of economic recovery, the governor is going to make a series of devastating withholds to education while denying Missouri citizens the same tax breaks he has supported for our state’s largest corporations,” Senate Appropriations Chairman Kurt Schaefer, R-Columbia, said in a news release.

House Budget Chairman Rick Stream, R-Kirkwood, added: “These withholds cannot even be taken seriously with the revenue growth we are experiencing.”

House Speaker Tim Jones, R-Eureka, said: “This is nothing more than a politically motivated stunt that places Missouri families and children at risk by needlessly cutting critical education funding in an attempt to generate controversy over a common sense tax reduction bill for all Missourians.”

And Senate President Pro Tem Tom Dempsey, R-St. Charles, said: “There is absolutely no reason or need to withhold revenue. To date, net general revenue is up 10.2 percent over last year, which should net $350 to $400 million over the ... revised consensus revenue estimate for the current budget.”

Nixon acknowledged the state government will end the 2012-13 business year this weekend with a more than $300 million surplus.

“But that’s less than three weeks of state spending,” the governor told reporters, holding firm to his administration’s calculations that the tax-cut bill lawmakers passed, and he vetoed, will create a fiscal nightmare if lawmakers override the veto.

That’s why he also told Luebbering to begin planning for another state employee downsizing if the tax cut bill is put into law over his veto.

She told reporters in a separate briefing: “We don’t have specifics on that, and won’t for quite some time.

“I’ll be working with the departments to develop a plan to cut another 1,000 positions out of state government.”

If lawmakers uphold the veto when they meet in September, the governor said, much of the withheld money can be released back into the budget.

“Clearly a significant portion of it would — especially the education funding (and) the timely investments in health care,” he said. “As lawmakers begin to understand the problems with House Bill 253 (the tax-cut measure) and their immediate and continuing consequences, I am confident that they will come to the same conclusion I have — this bill should not become law.

“But no governor can responsibly manage a state government on the assumption that a veto will be sustained.”